Pot Brands Race to Retail Front Line for Edge in Competitive Cannabis Landscape

Pot Brands Race to Retail Front Line for Edge in Competitive Cannabis Landscape

Article excerpt

Pot companies race to retail front line

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TORONTO - As the race to produce enough cannabis for the soon-to-be-legal market gets increasingly crowded, licensed producers are setting their sights on the next frontier in the race for maximum pot profitability: developing retail stores.

Pot producers have been ramping up production in preparation for the legalization of marijuana for recreational use later this year and -- realizing there is a healthy collective pipeline of product coming online over the next few years -- are looking to deploy their cash in more profitable ways, said Russell Stanley, special situations analyst with Echelon Wealth Partners.

Retail is high on their priority list, said Stanley. He points to cannabis dispensary operations south of the border, which offer a direct connection to the consumer through "budtenders" who personalize the potentially overwhelming experience. Such vertical integration also serves to gives their products a competitive edge.

"That is no doubt something that Canadian producers are seeing as a motivation for getting into distribution," he said. "Because the closer they are to the buyer, the stronger their competitive position may be."

Edmonton-based Aurora Cannabis Inc. announced last week that it will acquire a 19.9 per cent stake in Liquor Stores N.A. Ltd., which operates throughout Alberta and in British Columbia, for $103.5 million, fuelling Liquor Stores' plans to launch a cannabis store brand and convert some of its existing outlets.

Alberta, where Liquor Stores has a vast retail footprint, is among the provinces that will allow private retailers to sell recreational cannabis when it is legalized in Canada this summer.

B.C. officials said last week the province's cannabis regulatory framework will allow for sales online and through both private and government-operated stores. Manitoba, Saskatchewan and Newfoundland and Labrador have also said the private sector will handle the provinces' retail outlets -- making those provinces fertile ground for fierce pot retail competition.

Provinces such as Ontario, Quebec, Nova Scotia and Prince Edward Island have tasked their provincial liquor boards to handle retail sales of marijuana, and Yukon Territory has said distribution and sales will be limited initially to government-run outlets.

But Aurora's chief corporate officer Cam Battley is convinced the other provinces will warm up to the idea of private retailers.

"I suspect that will change over time," he said.

"We're going to be poised and ready to enter every market where we are allowed."

Federal Health Minister Ginette Petitpas Taylor said last week that while the government is on track to legalize pot by July, it's not clear when retail sales will be up and running. She told senators that the provinces and territories have indicated that once the Cannabis Act is given royal assent, they'll need an eight to 12 week transition period afterwards to prepare for retail sales. …